MG106 Strategic Management
London School of Economics and Political Science
July 1, 2025
1997: 90 days from bankruptcy
2010: World’s most valuable tech company
How did Apple do it?
1️⃣ What have been Apple’s sources of competitive advantage?
2️⃣ Is the PC industry attractive? What are the dynamics?
3️⃣ How sustainable is Apple’s position in PCs? Smartphones? iPads?
We’ll explore: Resources vs Capabilities • VRI Framework • Industry Analysis
What creates competitive advantage?
Resources (What firms HAVE)
Capabilities (What firms can DO)
Key Insight: Resources + Capabilities → Competitive Advantages
Not just product features!
Valuable: Does it help exploit opportunities or neutralize threats?
Rare: Do few competitors possess it?
Inimitabile: Is it hard to copy or substitute?
All three conditions must be met for sustainable advantage
What resources and capabilities has Apple developed?
Think tangible, intangible, and human
Resources:
Capabilities:
But which ones are sources of sustainable advantage? 🤔
| Resource/Capability | V | R | I | Result |
|---|---|---|---|---|
| Beautiful design | ✓ | ❌ | ❌ | Temporary advantage |
| Premium brand | ✓ | ✓ | ✓ | Sustained advantage |
| Retail stores | ✓ | ❌ | ❌ | Competitive parity |
| Ecosystem lock-in | ✓ | ✓ | ✓ | Sustained advantage |
| Innovation culture | ✓ | ✓ | ✓ | Sustained advantage |
Notice: Product features ≠ sustainable advantages
Beautiful Design (V✓ R❌ I❌)
Ecosystem Lock-in (V✓ R✓ I✓)
The difference? Time, complexity, and path dependence
Let’s analyze the PC industry dynamics
What forces shape profitability?
Verdict: Terrible Industry
Suppliers capture most value (~$20B) vs manufacturers (~$12B)
What happened?
Jobs’s Response:
Can this last?
| Product | VRI Analysis | Key Threat | Outlook |
|---|---|---|---|
| Mac | Ecosystem helps, but… | Bad industry | Niche player |
| iPod | iTunes lock-in eroding | Streaming, phones | Declining ⬇️ |
| iPhone | App Store = new ecosystem | Android | Strong… for now ✓ |
| iPad | Too early | Unknown | ??? |
Pattern: Ecosystems matter more than products
Key Learning: Must create new competitive space, not just better products
About Resources
✓ Features ≠ Advantages
✓ VRI test is strict (most fail)
✓ Capabilities > Resources
✓ Time creates inimitability
About Strategy
✓ Industry structure matters
✓ Change the game, don’t just play better
✓ Ecosystems > Products
✓ Timing is critical
Bottom Line: Sustainable advantage requires resources that are V + R + I
Bear Case 🐻
Bull Case 🐂
What matters most: Can Apple keep creating new V-R-I resources?
Focus Questions:
Think: Can you copy-paste success across borders? 🚗